Wages growth slows to 18-year low

Wage growth has eased to its slowest annual pace since the current index series was launched 18 years ago, with company cost-cutting, low inflation and last year's spike in unemployment keeping a lid on demands for better pay.

The Australian Bureau of Statistics said on Wednesday that the seasonally-adjusted wage price index rose a mere 0.5 per cent in the December quarter last year to reach an annual rate of 2.2 per cent.

The latest data means wages growth is only just staying ahead of the official consumer price index, with headline inflation last measured at 1.7 per cent and the trimmed mean, or core inflation, at 2.1 per cent.

"Over the last year, private sector wages grew at a slower pace than the public sector: 2 per cent compared to 2.6 per cent, seasonally adjusted," the ABS said.

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"In mining, electricity, gas, water and waste services; construction; and administrative and support services, wages grew over the last year at the lowest rate since the commencement of the series," it said.

By state, wage growth was stronger in New South Wales and Victoria than in Western Australia, which has borne the brunt of the resources downturn.

Wages there grew only 1.8 per cent year-on-year, compared with 2.1 per cent in New South Wales and 2.4 per cent in Victoria.

Growth rates also varied between employment sectors, with employees in financial and insurance services best-off, at 2.7 per cent, and those in administrative and support service the worst, with an annual pay rise of 1.4 per cent. Wage growth in mining came in at 1.5 per cent for the year.

"Subdued wages growth has been supporting jobs growth overall but household income growth has remained weak," ANZ Bank said.

"We expect modest improvement in wages and household income growth, and hence consumption growth, over the year ahead.

"But we struggle to see annual growth in household spending returning to 3 per cent rates as per the RBA view," the bank said.

Commonwealth Bank of Australia senior economist John Peters said a surge in the jobless rate a year ago dampened employee enthusiasm for better pay.

"In a nutshell, the spike up in unemployment rate to 6.4 per cent in January 2015 to its highest level in 13 years, and the accompanying lift in spare capacity in the labour market, has toned down workers' pursuit of higher wages," he said.